[00:00:02] Speaker 00:
Case number 19-1011, music choice appellant versus copyright royalty board at L. Mr. Faulkner for the appellant, Ms.

[00:00:10] Speaker 00:
Utrecht for the appellees, and Mr. Hellman for the intervener.

[00:00:46] Speaker 06:
Good morning, Your Honors.

[00:00:47] Speaker 06:
May it please the Court?

[00:00:48] Speaker 06:
My name is Paul Fackler.

[00:00:49] Speaker 06:
I'm counsel for Music Choice.

[00:00:51] Speaker 06:
I'd like to reserve three minutes for rebuttal, please.

[00:00:55] Speaker 06:
I'd like to focus on the two threshold errors that MusicChoice identified in its briefing related to the copyright royalty board's ruling that MusicChoice's internet transmissions, to the extent they were received by subscribers outside of their homes, are entirely excluded from the scope of the pre-existing subscription service license.

[00:01:18] Speaker 06:
The first of those threshold errors was the board taking up the issue at all in the first place.

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At no time during the proceeding did SoundExchange ask for a ruling that these Internet transmissions were outside the scope of the license.

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To the contrary, SoundExchange expressly disclaimed any ruling on that point.

[00:01:38] Speaker 06:
What they were arguing was that the judges should set a separate rate for those... The statute simply says if the issue is presented.

[00:01:46] Speaker 05:
That doesn't mean it's necessarily presented by a party.

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It could be presented by the judges thinking

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That was an interior legal issue, and they are not a federal court, so they're not limited to the practices of a federal court.

[00:02:02] Speaker 06:
Your Honor, there is... I'm sorry.

[00:02:05] Speaker 06:
They're an agency.

[00:02:06] Speaker 06:
Yes, Your Honor, but there is precedent directly on this point, and the same situation... Directly?

[00:02:12] Speaker 06:
Yes, on the point that you just raised.

[00:02:14] Speaker 06:
In the webcasting four proceedings,

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What we had at the end of the proceeding, after the close of the record, the judges felt that there was evidence in the record that had been submitted for a different reason.

[00:02:26] Speaker 06:
That's an evidentiary question, not a legal argument.

[00:02:31] Speaker 06:
Your Honor, the Register specifically interpreted the presented language that Your Honor just referenced as requiring that the very reason the Register rejected the referral in that case is because that theory had not been presented

[00:02:46] Speaker 06:
by the parties during the course of the proceeding.

[00:02:48] Speaker 06:
But it was an evidentiary theory, wasn't it?

[00:02:52] Speaker 05:
No, you're right.

[00:02:53] Speaker 05:
I'm sorry.

[00:02:53] Speaker 05:
On a regulation of both those cases, you cited where evidence cases.

[00:03:00] Speaker 06:
Your Honor, we cited three cases.

[00:03:02] Speaker 06:
There were the two cases of this court, intercollegiate broadcasting and sudden devotional claimants.

[00:03:08] Speaker 06:
And those two cases were both evidentiary cases, but also arbitrary and capricious for ruling based on these theories that were not presented by the parties.

[00:03:20] Speaker 06:
But in the webcasting for proceeding, the register, this was in the context of construing the statute, the referral statute itself, which contains that presented by the parties language that Your Honor was just referring.

[00:03:33] Speaker 06:
And the register construed that language quite specifically, now cited IBS into collegiate and settling devotional claimants, but also said very specifically that it cannot be considered presented by the parties if it was not understood during the proceeding to be the subject of litigation, if it was not presented by the parties.

[00:03:53] Speaker 06:
Wait a minute.

[00:03:53] Speaker 05:
You said it couldn't be considered presented by the parties.

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Did the register say it couldn't be presented other than by the parties?

[00:04:04] Speaker 05:
The register focused on the parties.

[00:04:07] Speaker 05:
That's my point.

[00:04:10] Speaker 05:
I give up.

[00:04:13] Speaker 06:
I can't.

[00:04:20] Speaker 06:
The register was very specific about this and focused on the problem of the problem that this presents when the judges are the ones who come up.

[00:04:28] Speaker 06:
Now, there are ways, Your Honor,

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I would agree with you if the concern is, are the judges in all instances completely bound by the scope of what the parties put in an argument in the proceeding?

[00:04:39] Speaker 06:
There are circumstances, and even in settling devotional claimants, this court noted that the judges have various ways to, if early enough in the proceeding, let me take a step back.

[00:04:51] Speaker 06:
One of the charming features of these proceedings is that the parties cases get presented on paper months before the hearing starts.

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in separate rounds, a direct case, a rebuttal case.

[00:05:03] Speaker 06:
The hearings go on typically five weeks.

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There are multiple opportunities where the court, if they identify a threshold issue that the parties have not raised, for them to request that the parties address those issues.

[00:05:17] Speaker 06:
It is a very active bench, I can tell you having done several of these proceedings.

[00:05:21] Speaker 06:
If you read the transcript in this, the SR's proceeding, you will see a good percentage of the time the hearing is devoted to the judge's questions.

[00:05:30] Speaker 06:
So this is not a case that presents that issue, but I would agree with Your Honor, in a case like that, if the judges raise the issue and the parties have the opportunity to develop a factual record on that point,

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then it would be appropriate.

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And I think it's real.

[00:05:46] Speaker 05:
Well, suppose it's only a legal question.

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Well, this was certainly a mixed question of determining whether there are all these.

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That's a separate argument.

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Right.

[00:06:01] Speaker 06:
But let's assume it's strictly a legal question.

[00:06:04] Speaker 06:
Well, the question in webcasting four was whether the judges had the authority to set a different type of structure for the rate for webcasters.

[00:06:13] Speaker 06:
That was a legal question.

[00:06:14] Speaker 06:
That was a purely legal question that was referred to the register and the register rejected it.

[00:06:18] Speaker 01:
I don't know the details of that one actually, but the register, it sounds like the register decided whatever the register decided there, but here the register decided to entertain the question.

[00:06:29] Speaker 06:
Well, just because the register erred this time doesn't mean we can't review that error.

[00:06:33] Speaker 01:
But it's not precedent.

[00:06:34] Speaker 01:
I mean, you said you classified it as precedent.

[00:06:37] Speaker 01:
And I'm not understanding why it's precedent.

[00:06:39] Speaker 06:
I'm sorry.

[00:06:41] Speaker 01:
I mean, it's preceding.

[00:06:42] Speaker 01:
It's an occurrence that happened before.

[00:06:44] Speaker 01:
But why is it binding anybody?

[00:06:47] Speaker 06:
Well, because it was a legal ruling by the register construing the statute, which has to do with the scope not only of referrals to the register, but which is intertwined with the notion of

[00:06:58] Speaker 06:
what the judges can consider when they are then doing their final determination.

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And notably, it's important... You're not talking about our cases.

[00:07:06] Speaker 05:
You're talking about a case that the registrars decided.

[00:07:11] Speaker 06:
I'm talking about a similar copyright royalty board case... No, no, no.

[00:07:15] Speaker 05:
You're not talking about the two cases that you cited in your brief.

[00:07:18] Speaker 05:
Correct.

[00:07:19] Speaker 05:
There are cases.

[00:07:20] Speaker 05:
Correct.

[00:07:21] Speaker 05:
I read his evidentiary questions.

[00:07:24] Speaker 06:
I respectfully disagree with Your Honor, but I understand Your Honor's point.

[00:07:27] Speaker 06:
This is a separate

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rule in which we also briefed in both our opening briefs.

[00:07:31] Speaker 05:
So your argument is arbitrary and capricious for the register has switched her position as to whether presented means men had to be presented by the parties.

[00:07:43] Speaker 06:
Yes, and even if it hadn't been there, it was certainly also arbitrary and capricious for the judges to take the issue up even after the referral.

[00:07:53] Speaker 06:
In the webcasting fore proceeding, after the register ruled in this fashion,

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In the final determination, the judges themselves noted the Register's ruling.

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They reiterated that they thought that there was evidence in the record that had been submitted by the parties for a very different purpose that they thought could have supported this ruling that they wanted to make.

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But they noted then, in light of the Register's ruling, that the interpretation of that evidence out of context and without adequate input of the parties would be capricious.

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Moreover, reopening the proceeding at this juncture long after the closing of the record would be improper.

[00:08:33] Speaker 06:
So that was in webcasting 481 Federal Register 23-619.

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So even the judges in that proceeding understood the register to be limiting in that sense, and they acknowledged it would be arbitrary and capricious to go searching through the record that had been established without reference to this new argument and try to map that evidence

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onto this new argument without giving the parties the opportunity to introduce additional evidence and at least contextualize that evidence.

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And that's exactly what the judges did here.

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They did the opposite of what they recognized would be capricious.

[00:09:10] Speaker 05:
Counsel, let me ask a question that goes to a more fundamental argument.

[00:09:15] Speaker 05:
Suppose the register in this case had held that I interpret the word service to refer

[00:09:27] Speaker 05:
to exclude mobile apps, not internet outside the homes, but mobile apps, acknowledging that there was internet outside the homes through computers, but there was no mobile apps back in 1998.

[00:09:52] Speaker 05:
And so I interpret service as not including mobile apps.

[00:09:58] Speaker 05:
Would you have the same, would that be an acceptable argument?

[00:10:02] Speaker 06:
I absolutely wouldn't.

[00:10:03] Speaker 06:
Why?

[00:10:03] Speaker 06:
Well, you would have to look at how the register set up the test, okay?

[00:10:08] Speaker 06:
The statutory, first, you know, obviously that is not the case that we have.

[00:10:11] Speaker 05:
No, but I'm asking hypothetically.

[00:10:13] Speaker 05:
Yes.

[00:10:14] Speaker 05:
You know, you never answer a hypothetical question by saying that's not this case.

[00:10:20] Speaker 05:
Once when Judge Scalia was sitting here and a lawyer said that, he threw the briefs at him.

[00:10:27] Speaker 06:
Well, I hope your honor won't do the same.

[00:10:29] Speaker 06:
I'll try to talk to you.

[00:10:31] Speaker 06:
I promise I won't.

[00:10:32] Speaker 06:
I apologize, your honor.

[00:10:35] Speaker 06:
The reason that it would be just as bad, because the register correctly in setting out this test,

[00:10:41] Speaker 06:
said if we're going to come up with a new legal test to determine the scope of the pre-existing service license, let's look at the statute, always a good first step, and let's look at these grandfather provisions.

[00:10:52] Speaker 06:
And this is what the register did.

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And in particular, look at the distinction between section 114 D2B versus D2C.

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These are two sets of rules, programming rules, for a licensee that takes advantage of section 114.

[00:11:09] Speaker 06:
This is one of the key grandfather provisions for pre-existing services.

[00:11:12] Speaker 05:
And the statute itself... But we once before have looked at the word service and said it had ambiguity to it.

[00:11:20] Speaker 05:
Now, let's just deal with my hypothetical.

[00:11:24] Speaker 06:
Yes.

[00:11:25] Speaker 05:
Suppose the copyright, the registrar had simply held

[00:11:32] Speaker 05:
that service did not include, the 1998 service did not include mobile apps.

[00:11:41] Speaker 05:
Hadn't said internet outside the home, but just mobile apps.

[00:11:46] Speaker 06:
Well, there'd be no basis in the statute for coming up with an arbitrary distinction like that.

[00:11:50] Speaker 06:
Why?

[00:11:51] Speaker 05:
Well, because there were no mobile apps back in 1998.

[00:11:55] Speaker 06:
Right, but the register ruled in this very proceeding that the key distinction is whether it is what the register considered an existing service offering or an expanded service offering.

[00:12:07] Speaker 06:
would have had to have started, at least started in the same way, of saying, Your Honor, respectfully, I believe what the Register was doing was coming up with a legal test to resolve the ambiguity Your Honor is talking about.

[00:12:19] Speaker 06:
How do we determine what service means?

[00:12:21] Speaker 06:
This is how the Register chose to do it.

[00:12:23] Speaker 06:
And I think the Register would have had to have chosen to do it as an absolutely reasonable way to do it, which is to say, look at these

[00:12:30] Speaker 05:
look at the actual statute, how does it distinguish between the register started by... You see, my question assumes you're correct, arguing that the Internet in the home, the Internet outside the home, did exist in 1998.

[00:12:49] Speaker 05:
There's an argument on the legislative history on that.

[00:12:55] Speaker 05:
Let's assume you're right about that.

[00:12:57] Speaker 05:
The mobile apps didn't exist in 1998.

[00:13:00] Speaker 05:
So if the register had interpreted service to include, to exclude that.

[00:13:07] Speaker 06:
But the register acknowledged that existing service options.

[00:13:11] Speaker 06:
No, I'm giving you a hypothetical.

[00:13:12] Speaker 06:
It would have, Your Honor, it would have been error.

[00:13:15] Speaker 06:
Why?

[00:13:16] Speaker 06:
Because there would be no basis from within the statute.

[00:13:19] Speaker 06:
The statute

[00:13:22] Speaker 06:
The register interpreted that part of the statute as saying in an existing service offering, you're allowed to adapt and change.

[00:13:30] Speaker 06:
For example, the register gave the example of cable, that just because cable was the technology behind cable transmissions at the time, in 1998, were a certain way, they've changed it.

[00:13:42] Speaker 01:
Yeah, but that's just a matter of degree.

[00:13:43] Speaker 01:
And I don't understand your answer to the hypothetical, because if the register said a mobile app is just a different animal,

[00:13:49] Speaker 01:
It's a different animal because you can access it outside the home in a way that you just can't without the app.

[00:13:55] Speaker 01:
So it's a different product basically.

[00:13:58] Speaker 01:
What's wrong with that?

[00:13:58] Speaker 05:
That seems like that would be... To use the word I used in that opinion, it's a different program.

[00:14:05] Speaker 06:
I apologize for going back to what's actually in the register's decision, but that is what's on appeal here.

[00:14:13] Speaker 06:
The register said that you have to look, if you're talking about an existing service offering in a transmission medium used,

[00:14:20] Speaker 06:
in 1998, that can adapt fairly broadly to new technologies in new ways.

[00:14:27] Speaker 06:
And that's the distinction.

[00:14:29] Speaker 06:
The problem is that by excluding all internet transmissions, by the way, which is what the register ruled, all internet transmissions are outside the scope of the existing service offering.

[00:14:41] Speaker 06:
That was where the register went.

[00:14:42] Speaker 05:
I'm assuming you're right about that argument and asking you the next question.

[00:14:47] Speaker 05:
You seem to me you're ducking in the answer.

[00:14:50] Speaker 06:
I'm not trying to, Your Honor.

[00:14:51] Speaker 06:
The Register specifically said, if I'm right, and Internet Transmissions for Music... No, I'm talking about as if the Register had said something else.

[00:15:00] Speaker 05:
There would be no basis in the statute for allowing... Why could the Register have concluded, just as the new Chief Judge asked, that the mobile app was a different offering?

[00:15:20] Speaker 05:
In our prior opinion, we said service included both the entity and the offering.

[00:15:28] Speaker 05:
Yes, Your Honor.

[00:15:29] Speaker 05:
Why couldn't the Register have included that the mobile app was a different offering?

[00:15:35] Speaker 06:
Well, first of all, the Register would have to be making that distinction as a matter of law that just without any fact findings about what the characteristics were of

[00:15:48] Speaker 06:
You know, even the register said you have... Well, everybody agrees that there was no mobile app in 1998.

[00:15:54] Speaker 06:
Right, but the register also noted there were new forms of cable transmission that weren't around in 1998 that were allowed to be, that still didn't take you outside of being an existing service offering.

[00:16:05] Speaker 06:
and a mobile app would be just the same as Internet outside the home.

[00:16:09] Speaker 03:
Is it your view that a mobile app and the Internet are the same type of service?

[00:16:14] Speaker 06:
No, no, no.

[00:16:14] Speaker 06:
But what the register held is when the statute uses medium of transmission, it's in a very broad sense.

[00:16:21] Speaker 06:
It's that cable isn't limited to just what cable was in 1998.

[00:16:24] Speaker 06:
Internet, the register said, isn't just a specific type of internet transmission.

[00:16:29] Speaker 06:
It's understood to be something broader, just using the internet.

[00:16:33] Speaker 06:
And that's the level at which the statute speaks in making these different categories.

[00:16:37] Speaker 01:
Can I ask you a question about what's practically at stake here?

[00:16:40] Speaker 01:
So is it true that going forward after this cycle, 2018 to 2022, that the

[00:16:48] Speaker 01:
the pre-existing, the grandfathering idea is just off the table now.

[00:16:52] Speaker 06:
That is not correct, Your Honor.

[00:16:54] Speaker 06:
What has changed is the rate standard.

[00:16:56] Speaker 06:
And it's actually going to carry through, through the next proceeding we're going to skip, and then whatever the five years after that, I apologize, math is not my strong suit right now, but we're going to skip a proceeding, and then starting with the next proceeding, the rate standard is going to change.

[00:17:13] Speaker 01:
But the difference... That's all I'm talking about is the rates.

[00:17:16] Speaker 06:
But pre-existing subscription services category will remain.

[00:17:19] Speaker 06:
It's still going to have grandfathered programming rules, like I was talking about before.

[00:17:24] Speaker 06:
And it's still going to have a separate proceeding.

[00:17:26] Speaker 06:
It's going to be in a different time than the non-pre-existing cable and satellite television services.

[00:17:33] Speaker 01:
But what we're talking about in this case is rates.

[00:17:35] Speaker 01:
And with respect to rates, is it?

[00:17:39] Speaker 06:
Actually not, Your Honor.

[00:17:40] Speaker 06:
The board ruled that these transmissions are excluded entirely from both

[00:17:45] Speaker 06:
all of the grandfather provisions, including the regulatory, you know, the rules for the programming and everything else.

[00:17:52] Speaker 06:
It's actually broader, the ruling in this case, than just the rate standard.

[00:17:57] Speaker 01:
I thought there was a distinction between existing and expanded.

[00:18:01] Speaker 06:
Right, and the only thing that the board decided, because the register had said as a matter of law, can't be existing.

[00:18:08] Speaker 06:
So the only question, and the only reason we have a six-factor test, is to then determine between the next two categories, right?

[00:18:14] Speaker 06:
And the board held that to the extent these Internet transmissions are received inside the home, and by the way, that would apply to apps used inside the home as well.

[00:18:24] Speaker 06:
They're within the statute, but they declined to set a separate rate for them.

[00:18:28] Speaker 06:
But to the extent they're received outside the home, they're completely outside for both the rate standard and the programming rules and anything else.

[00:18:40] Speaker 06:
I assume I'm well out of time.

[00:18:42] Speaker 01:
Thank you.

[00:18:42] Speaker 01:
Thank you, Council.

[00:18:43] Speaker 01:
We'll give you some time for rebuttal.

[00:18:58] Speaker 02:
Good morning, Your Honor.

[00:18:59] Speaker 02:
Jennifer Utrecht on behalf of the government.

[00:19:01] Speaker 02:
Your Honor, when

[00:19:03] Speaker 02:
Congress enacted the Digital Blending Copyright Act in 1998.

[00:19:06] Speaker 02:
It did so against an administrative backdrop that everyone very well understood what the three existing services were that were grandfathered.

[00:19:15] Speaker 02:
And as this court noted in MUSAC, the statute describes it in an extremely ambiguous way, because the term service is used both to refer to business energy as it's used to refer to services.

[00:19:25] Speaker 02:
But the historical context of this is very clear.

[00:19:28] Speaker 02:
There were three services.

[00:19:30] Speaker 02:
There was MUSAC, DMX.

[00:19:32] Speaker 02:
and DISH, and sorry, Music, MusicChoice, and DMX, and MusicChoice offered a cable and satellite subscription service.

[00:19:41] Speaker 02:
There was no internet subscription service.

[00:19:43] Speaker 02:
It was a cable and satellite subscription service.

[00:19:47] Speaker 02:
And I'd like to, I think, address the two threshold errors that opposing council has identified here.

[00:19:53] Speaker 02:
Oh, wait a minute.

[00:19:54] Speaker 05:
Now I'm confused.

[00:19:55] Speaker 05:
I thought it was indisputable that MusicChoice had

[00:20:00] Speaker 05:
offered internet service in 1998.

[00:20:04] Speaker 02:
So I think it should be

[00:20:06] Speaker 02:
I want to be very clear and precise with this answer.

[00:20:09] Speaker 02:
I think that we are not disputing for the purpose of this litigation that Music Choice as a business may have made internet transmissions.

[00:20:18] Speaker 02:
But that does not mean that its internet transmissions were part of the grandfathered pre-existing subscription service.

[00:20:27] Speaker 02:
The pre-existing subscription service that was grandfathered through the DMCA was Music Choice's

[00:20:34] Speaker 02:
cable and satellite service which its business model was extensively described.

[00:20:40] Speaker 05:
How do you get that out of the statute?

[00:20:43] Speaker 02:
So I think there are a couple of things in the statute that are worth pointing out.

[00:20:47] Speaker 02:
So the first is pre-existing subscription services defined in section 114J11 and it says it has to be a service.

[00:20:55] Speaker 02:
A subscription service in particular and it is

[00:20:59] Speaker 02:
very obvious from even the way that we have talked about the service now, that Music Choice's service was its cable and satellite service.

[00:21:08] Speaker 02:
I think the second aspect of this is that the DMCA was enacted against this administrative backdrop, and we can presume that Congress is legislating against this proceeding that had ended immediately before.

[00:21:21] Speaker 05:
You interpret the service as precluding

[00:21:25] Speaker 05:
the word precluded internet offering?

[00:21:29] Speaker 02:
You don't mean that, do you?

[00:21:30] Speaker 02:
The existing service, I think, the way the register talked about it.

[00:21:34] Speaker 05:
Wait a minute.

[00:21:34] Speaker 05:
I'm asking about whether the word service precluded an offering of internet.

[00:21:43] Speaker 05:
No, Your Honor, but I do think that the... So if Music Choice was offering an internet service,

[00:21:54] Speaker 05:
outside the home, but not a mobile app.

[00:21:59] Speaker 05:
Wasn't that included within the term service?

[00:22:02] Speaker 02:
So I think there are two responses to that.

[00:22:06] Speaker 02:
The answer is no.

[00:22:07] Speaker 02:
And I think there are two reasons why that's true.

[00:22:11] Speaker 02:
The first is, as this court recognized in MUSEC, the term service is ambiguous, and we have to understand it with respect to context, including legislative history, but also including the context of the statute.

[00:22:24] Speaker 02:
The second reason why, at least in this respect, the existing service, the thing that Congress was trying to grandfather, which may expand in ways, including to the Internet in certain limited respects, but the very core of the service does not include the Internet as evidenced by 114D2.

[00:22:44] Speaker 02:
Congress drew a very clear distinction between the conditions that should apply to the services as they existed when they are transmitting in the same medium, cable and satellite,

[00:22:54] Speaker 02:
versus when they're transmitting in a new medium.

[00:22:56] Speaker 02:
And on C, which is the new medium, lays out a number of new conditions that have to apply.

[00:23:03] Speaker 03:
Can you even dispute, though, that Music Choice was transmitting over the internet?

[00:23:11] Speaker 02:
Again, Music Choice's business, the entity, the business entity, may have been making internet transmissions.

[00:23:19] Speaker 02:
But that does not mean that that's part of the core service that was grandfathered in the Act.

[00:23:25] Speaker 02:
Well, based on what textual argument, though?

[00:23:28] Speaker 03:
Your argument is about intent and history and background.

[00:23:31] Speaker 03:
What about the words of the statute?

[00:23:33] Speaker 02:
As I was explaining, 114D2C laid out a number of new conditions that were supposed to apply when you expand into a new medium.

[00:23:42] Speaker 02:
And many of these conditions were designed with respect to the internet.

[00:23:50] Speaker 02:
And you can see that.

[00:23:51] Speaker 02:
So there are conditions that require services to not interfere with digital rights management software, to not allow their consumers to scan and copy music.

[00:24:06] Speaker 02:
These are conditions that Congress designed in order to prevent internet users from engaging in copyright infringement through using these subscription services.

[00:24:15] Speaker 02:
And it would be very odd.

[00:24:17] Speaker 03:
Can you clarify why would that mean that some internet services were not grandfathered into the statute?

[00:24:23] Speaker 03:
You know, the fact that news services may have special provisions for internet services doesn't necessarily mean that internet services were not grandfathered in.

[00:24:32] Speaker 02:
Well, so it's because

[00:24:35] Speaker 02:
A pre-existing, if you look at D2B versus D2C, a pre-existing subscription service that's operating, it says in the same medium, has these historical conditions.

[00:24:46] Speaker 02:
But if they expand into a new medium, they have to comply with all of these additional ones.

[00:24:51] Speaker 04:
What's the new medium here?

[00:24:52] Speaker 02:
The new medium would be the internet here.

[00:24:53] Speaker 05:
The new medium is... Well, why is it the new if it was in existence in 98?

[00:24:58] Speaker 02:
The internet was in existence.

[00:25:01] Speaker 05:
No, no, no.

[00:25:01] Speaker 05:
It was being provided by Music Choice.

[00:25:04] Speaker 02:
So Music Choice, the business, may have been providing the internet.

[00:25:08] Speaker 05:
Why wasn't, according to the copyright, excuse me, the register, it would be bucket two, right?

[00:25:16] Speaker 05:
But still bucket two was covered by the grandfather clause.

[00:25:22] Speaker 02:
The expanded service, right.

[00:25:24] Speaker 02:
And this is, I think, the distinction that I'm identifying.

[00:25:28] Speaker 02:
The existing service did not include the Internet.

[00:25:31] Speaker 02:
If it expanded into the Internet... Well, I don't understand.

[00:25:35] Speaker 05:
I'm still having problems.

[00:25:36] Speaker 05:
Why isn't it included back in 98 if they were providing it, not only Internet service, but providing it outside the home?

[00:25:49] Speaker 05:
So I think that the... I'm not sure... I know there's legislative history which indicated at one point Congress is referring to both just satellite and cable.

[00:26:01] Speaker 02:
Right.

[00:26:02] Speaker 02:
But the statute... But it's not simply... The statute is... Right, and I think this is why I'm trying to explain this distinction between D2 and D3.

[00:26:09] Speaker 05:
Where's the ambiguity in the statute that you're relying on?

[00:26:12] Speaker 02:
The ambiguity in the statute is the definition of service, right?

[00:26:15] Speaker 02:
The pre-existing subscription service definition in J11, as this court identified in MUSAC, is ambiguous.

[00:26:22] Speaker 02:
But it's also, I mean, we're not breaking new ground here.

[00:26:24] Speaker 02:
Everyone has recognized up until this point, including this court, that there are only three existing services.

[00:26:31] Speaker 02:
And the statute doesn't identify three services, but that is something that this court and the register have long understood to be true.

[00:26:39] Speaker 01:
Under your analysis of the statute, which you think

[00:26:42] Speaker 01:
excludes the internet altogether.

[00:26:44] Speaker 01:
Do you think that from pre-existing services?

[00:26:47] Speaker 02:
From the core existing services.

[00:26:50] Speaker 02:
But the existing service could expand into the internet.

[00:26:53] Speaker 02:
That's obvious from the register's decision as well as from the legislative history.

[00:26:57] Speaker 01:
But do you think it would have, the register didn't have freedom to say that what you're calling the core existing service, which is not a statutory term, but that the core existing services you're conceiving of it

[00:27:09] Speaker 01:
actually included Internet transmission because as a factual matter Internet transmission was going on in 1998.

[00:27:15] Speaker 01:
Do you think the register would have been

[00:27:17] Speaker 01:
precluded by the statute from reaching that conclusion?

[00:27:19] Speaker 02:
I think that the Register recognized, as this Court has, that the term, as it's defined, is ambiguous.

[00:27:26] Speaker 02:
But I also think that the Register identified a number of contextual clues as well as, within the statute, including this distinction between D2B and D2C, because as the Register explained, it would be very strange for Congress to have sub-solentio

[00:27:42] Speaker 02:
grandfathered in Internet transmissions to always have every Internet transmission, because it's the same medium, to always fall within the D2B conditions.

[00:27:51] Speaker 03:
But it would only be the Internet transmissions by a provider who was broadcasting through the Internet before, you know, during the relevant time period.

[00:28:00] Speaker 03:
It wouldn't be all new Internet services.

[00:28:03] Speaker 03:
It would be existing Internet services.

[00:28:06] Speaker 02:
Why would that be so strange?

[00:28:09] Speaker 02:
So I think the answer to that question is, again, Congress was legislating against this administrative backdrop in which a royalty proceeding had just concluded before this statute.

[00:28:23] Speaker 02:
That royalty proceeding involved only three services.

[00:28:26] Speaker 02:
It extensively defined what those three services did and who they were and what broadcasts and transmissions they were making.

[00:28:33] Speaker 05:
You mean three entities or three services?

[00:28:34] Speaker 02:
Three entities.

[00:28:35] Speaker 05:
Three entities with three services.

[00:28:38] Speaker 02:
Well, the three entities were offering three different services.

[00:28:42] Speaker 01:
But those services were limited to cable and satellite.

[00:28:44] Speaker 01:
I think your argument based on the preceding administrative resolution that informed Congress's consideration, I thought, was that

[00:28:54] Speaker 01:
When you look at that, what was going on with that, that was only cable and satellite.

[00:28:57] Speaker 01:
It may be true as a factual matter that music choice was transmitting via internet, but there's no reason to think that the administrative proceeding took account of internet transmissions at all.

[00:29:07] Speaker 01:
It was tethered solely

[00:29:09] Speaker 01:
to cable and satellite transmission?

[00:29:11] Speaker 02:
That's correct.

[00:29:12] Speaker 02:
And that is why it may be true that MusicToys as a business was making internet transmissions, but its service, its subscription service, the way it talked about it, the way the copyright owners talked about it during the arbitration proceeding, was a cable and satellite service.

[00:29:26] Speaker 02:
And so when Congress wrote the D2 conditions, the distinction between the same medium and a different medium, it was ensuring that if anyone were to, if any of these three services were to expand beyond those transmission mediums that

[00:29:39] Speaker 02:
were identified as their core existing service.

[00:29:42] Speaker 02:
So for example, one of these services only transmitted in satellite.

[00:29:47] Speaker 02:
If they were to expand into either cable or internet, that would be subject to the new conditions.

[00:29:52] Speaker 03:
But there's nothing in the statute that indicates a level of degree, right?

[00:29:57] Speaker 03:
So music choice

[00:29:58] Speaker 03:
was broadcasting over the internet.

[00:30:01] Speaker 03:
Maybe its internet offerings were small, but nothing in the statute suggests that it matters how much they were doing before the relevant date of grandfathering.

[00:30:16] Speaker 02:
Nothing in particular about the definition of J-11 mentions degree.

[00:30:22] Speaker 02:
That's true.

[00:30:23] Speaker 02:
But again, we're not breaking new ground.

[00:30:25] Speaker 02:
Everyone has understood this term to be extremely limited to these three, both as the court recognized in Muzak, these three businesses.

[00:30:32] Speaker 02:
and the three program offerings that they were making at that time.

[00:30:36] Speaker 02:
The reason that we have limited it in this way is because those were the three businesses who participated in the arbitration proceeding.

[00:30:45] Speaker 03:
So we have one of those three businesses here, and we have one of the services that they were providing at the time.

[00:30:50] Speaker 02:
We have their cable and satellite subscription service, which was

[00:30:55] Speaker 02:
what was happening at the time, but that was not, you know, it was neither internet nor was it a mobile application, which is an entirely, as questions have recognized, an entirely separate problem, which is that the mobile application does not resemble at all anything like even what they allege they were doing in 1998.

[00:31:17] Speaker 01:
What is the difference?

[00:31:19] Speaker 01:
actual practical difference between the internet transmission and cable and satellite transmission.

[00:31:24] Speaker 01:
You acknowledge that all three of them were going on, or at least you haven't disputed that all three of them were going on.

[00:31:28] Speaker 02:
We have not disputed that Music Choice was making internet transmissions, but we do dispute that it was part of the core subscription service.

[00:31:35] Speaker 01:
If it was making internet transmissions, it was making internet transmissions of something.

[00:31:40] Speaker 01:
And what is the difference about the something that was being transmitted over the internet?

[00:31:44] Speaker 01:
as opposed to the something that was being transmitted over cable or satellite.

[00:31:48] Speaker 02:
I think as just a fundamental matter, no one was subscribing to a separate internet service.

[00:31:54] Speaker 02:
No one was subscribing to I want to have music choices internet transmissions.

[00:31:58] Speaker 02:
They were subscribing to having music choices cable and satellite channels.

[00:32:02] Speaker 01:
And along with that apparently came internet transmission.

[00:32:06] Speaker 01:
Maybe people didn't care about that.

[00:32:08] Speaker 02:
it's just it seems like somebody had to care about it otherwise they wouldn't have had it they wouldn't have offered it why wasn't there some offering it's hard for me to answer these questions because my the extent of my knowledge about what music choice was doing in nineteen ninety eight is limited by stray statements that it made that it was happening before and there's no discussion of what those are in the record and those haven't been disputed right and so i

[00:32:39] Speaker 02:
What I can say is that the reason this grandfather provision was created was to protect the three businesses and the three services who had received a lower rate in the copyright arbitration royalty panel to allow them to continue those operations undisrupted by changes in the digital licensing scheme.

[00:33:03] Speaker 02:
And to include

[00:33:06] Speaker 02:
Other transmissions in a different medium that was not discussed and were not subject to that royalty rate-making would defeat the entire purpose.

[00:33:14] Speaker 05:
Even in the legislative history, Congress did contemplate the internet.

[00:33:22] Speaker 02:
So that's, well, but notably, Your Honor, in the legislative history, Congress said that a pre-existing service could expand into the internet, which illustrates, again, that Congress was contemplating.

[00:33:35] Speaker 05:
That would be bucket two.

[00:33:37] Speaker 05:
Music choice would still win if they're in bucket two, right?

[00:33:41] Speaker 02:
Well, that's... Right, so... Isn't that great?

[00:33:45] Speaker 05:
What was the answer to my question?

[00:33:47] Speaker 05:
Right, so the discussion... They would still win if they were in Bucket 2.

[00:33:49] Speaker 02:
If they were in Bucket 2, they would be subject to the lower rates for their Internet transmissions that are available portably.

[00:33:56] Speaker 05:
I don't know why they were answering that question.

[00:33:58] Speaker 02:
Yes, and so I wanted to be very clear that until this point we have been talking about Bucket 1, but yes, if we would like to move to Bucket 2, which I'm happy to answer questions about,

[00:34:08] Speaker 02:
The discussion with respect to bucket two is, has MusicChoice made its core cable and satellite service available, that same service available on the internet?

[00:34:19] Speaker 02:
And if so, then it would fall into bucket two.

[00:34:23] Speaker 02:
But it's very obvious from the facts

[00:34:27] Speaker 02:
that have been presented both during the hearing and in the rehearing that was sent to the judges, that Music Choice has offered a different service.

[00:34:39] Speaker 02:
There was, they now have a mobile application where their internet transmissions.

[00:34:44] Speaker 05:
Yeah, but that's not, if this case had involved only the distinction of mobile application, it would be a different case, wouldn't it?

[00:34:55] Speaker 02:
I read there were all different facts.

[00:35:00] Speaker 02:
It would be a different case, yes.

[00:35:01] Speaker 05:
No, no, no.

[00:35:03] Speaker 05:
If the register's opinion had said that mobile applications is a different service.

[00:35:11] Speaker 02:
So what the register

[00:35:13] Speaker 05:
Because it was clear it was not in existence in 1998.

[00:35:17] Speaker 05:
We have, it seems to me, a much easier case.

[00:35:20] Speaker 02:
What the Register said was that there are always going to be a number of different factors, because trying to figure out whether something is the same service is a fact-intensive inquiry.

[00:35:32] Speaker 02:
And you can expand even within the same transmission medium and still be a different service.

[00:35:38] Speaker 02:
I mean, that's Muzec, right?

[00:35:41] Speaker 02:
Muzec had expanded within satellite and still fell outside the pre-existing subscription service.

[00:35:47] Speaker 02:
And so the register did not make any findings one way or the other about whether there were mobile applications in 1998 or to the degree to which things were available outside the home.

[00:35:58] Speaker 02:
The register just said, this is something that

[00:36:01] Speaker 02:
when you're considering this question is a worthy factor.

[00:36:04] Speaker 02:
And in fact, when it was sent to the judges, the judges reasonably concluded that

[00:36:10] Speaker 02:
This mobile application was not available until after the enactment of the statute.

[00:36:15] Speaker 02:
It has greatly increased the amount of availability of internet portably in mobile applications on tablets.

[00:36:21] Speaker 02:
And this has taken MusicChoice's service, and it's a different program offering.

[00:36:28] Speaker 02:
It is not the same program offering as its residential cable and satellite service.

[00:36:31] Speaker 03:
Can I just ask you one question about remedy here?

[00:36:35] Speaker 03:
I mean, if we were to vacate

[00:36:37] Speaker 03:
the registrar's legal interpretation, same transmission medium, then could we sever parts of the order that were based on that legal determination?

[00:36:48] Speaker 02:
I think if you believed the registrar's legal interpretation were incorrect because the statute is unambiguous, then the appropriate remedy I think would be to remand

[00:37:00] Speaker 02:
to the copyright royalty judges to reconsider their factual analysis in light of the appropriate standard of law.

[00:37:08] Speaker 03:
Are you suggesting severance would be inappropriate?

[00:37:10] Speaker 02:
I'm not sure what would be severed because the judges made their determination based on the referral from the register and said this is the test that we think that we need to apply here and so

[00:37:27] Speaker 02:
If there were a new test, I think it is properly left to the agency to resolve the question in light of the new test.

[00:37:35] Speaker 05:
I have a strange question.

[00:37:38] Speaker 05:
How many lawyers work for the register of copyrights?

[00:37:42] Speaker 02:
I do not know the answer to that question.

[00:37:44] Speaker 02:
I wish I did.

[00:37:45] Speaker 02:
I'm very sorry.

[00:37:47] Speaker 02:
I've interacted with maybe a handful, less than a handful.

[00:37:52] Speaker 01:
Can I ask you the practical question I asked earlier

[00:37:56] Speaker 01:
rates, the relevance of the pre-existing rate going forward given the new legislation?

[00:38:04] Speaker 02:
So there will no longer be a lower rate for any pre-existing subscription services.

[00:38:15] Speaker 02:
I believe what opposing counsel said was that they would like to continue to use the pre-existing, the lower conditions, the historical pre-internet, early 1990s conditions for all of its transmissions.

[00:38:31] Speaker 02:
And I think this really underscores why we should not, the statute should not be interpreted to include within the core existing service the internet, because it would mean that the fact that

[00:38:44] Speaker 02:
a company that may have had a subscription service, made Internet transmissions before 1998, that they could continue to evade the conditions that Congress had clearly set forward in order to ensure that subscription Internet transmissions complied and did not infringe various protections of copyright.

[00:39:05] Speaker 04:
There's lower rates.

[00:39:07] Speaker 02:
The lower rates.

[00:39:09] Speaker 02:
But the rates are expiring.

[00:39:10] Speaker 02:
The conditions themselves, the things that transmissions by subscription services have to do.

[00:39:15] Speaker 02:
So the difference between historically what had to happen was you just had to ensure that you complied with the sound performance complement, which was don't play the same song a certain number of times.

[00:39:26] Speaker 02:
And you couldn't have an archive.

[00:39:29] Speaker 02:
Sorry, you couldn't pre-establish

[00:39:31] Speaker 02:
what songs you're going to be playing that day.

[00:39:34] Speaker 02:
But the new conditions, which everyone else has to comply with, and which the pre-existing subscription service is supposed to comply with if they expand into the internet, include things like do not evade digital rights management, do not allow people to scan music when you're playing it.

[00:39:51] Speaker 02:
There are seven more conditions that are supposed to happen.

[00:39:54] Speaker 02:
And I think MusicChoice's position is that it should not have to do that for any of its internet transmissions, even though Congress clearly

[00:40:01] Speaker 02:
intended for the pre-existing subscription services that expanded into any new medium, including the internet, to comply with these conditions.

[00:40:10] Speaker 01:
So the conditions continue, and the way you read it is the additional conditions continue to exist going forward, but there's no possibility of getting the lower rate any longer going forward.

[00:40:23] Speaker 01:
That's done with.

[00:40:24] Speaker 02:
Correct.

[00:40:26] Speaker 02:
When Congress passed the Music Modernization Act, it recognized that whatever investments it had protected that had occurred prior to 1998, continuing to allow these businesses who had made these early investments to benefit from the low rate was inappropriate.

[00:40:44] Speaker 02:
How much money is at stake?

[00:40:47] Speaker 02:
That is a question that's better served to either Sound Exchange or to Music Choice.

[00:40:56] Speaker 01:
Thank you, Counsel.

[00:41:12] Speaker 07:
Good morning, Your Honors.

[00:41:13] Speaker 07:
Matthew Hellman for Sound Exchange.

[00:41:15] Speaker 07:
May it please the Court.

[00:41:18] Speaker 07:
This Court has already held that the term service is ambiguous in the Muzak decision.

[00:41:24] Speaker 07:
And in addition in that decision, it also held that the term should be construed narrowly in light of the grandfathering provision that it was.

[00:41:32] Speaker 05:
It was ambiguous with respect to the issue presented in that case.

[00:41:35] Speaker 05:
That's correct.

[00:41:36] Speaker 05:
That doesn't necessarily mean it's ambiguous in this case, does it?

[00:41:41] Speaker 07:
I suppose not as a theoretical matter, but it certainly is.

[00:41:44] Speaker 07:
And if I could, I would... Then you should explain why.

[00:41:46] Speaker 07:
I will explain why.

[00:41:48] Speaker 07:
To determine whether something is ambiguous or not, it's a pretty straightforward test.

[00:41:52] Speaker 07:
We look to text, we look to structure, and we look to background.

[00:41:56] Speaker 07:
The structure in this case, as we've already discussed, is one in which Congress imposed additional conditions for internet transmissions, or transmissions that would be over the internet.

[00:42:09] Speaker 07:
Those conditions do not apply to a true pre-existing service in its original form.

[00:42:14] Speaker 07:
That at least creates ambiguity.

[00:42:17] Speaker 07:
And then when you look to the legislature.

[00:42:18] Speaker 05:
Wait, but I don't understand that.

[00:42:19] Speaker 07:
Please.

[00:42:20] Speaker 07:
Say that again.

[00:42:21] Speaker 07:
Certainly.

[00:42:21] Speaker 07:
If you look at how Congress divvied up the different obligations among the different services, the bucket one service, as you're referring to it, is exempt from certain requirements that are imposed on services that transmit over the internet.

[00:42:41] Speaker 07:
And by that I mean archiving and the other things that my colleague was talking about.

[00:42:46] Speaker 07:
Those conditions are designed to constrain internet service.

[00:42:50] Speaker 07:
What my friend on the other side is saying is that when Congress did that, they nevertheless wanted this supposed pre-existing internet service to be free of that.

[00:43:00] Speaker 07:
I think, frankly, that removes any ambiguity, but at a minimum, it means that the statute is ambiguous.

[00:43:06] Speaker 07:
And if we look at the legislative history, there is no doubt Congress said as clear as a bell that the pre-existing services that it was talking about, the bucket one services,

[00:43:16] Speaker 07:
were satellite and cable services.

[00:43:19] Speaker 07:
And not only that, it defined them in contradistinction to internet services.

[00:43:24] Speaker 07:
In the MUSAC case, there was something of a dispute between the majority opinion and the concurring opinion.

[00:43:30] Speaker 05:
I found that paragraph in the legislative history itself terribly ambiguous.

[00:43:35] Speaker 07:
That's right.

[00:43:37] Speaker 07:
And as Your Honor pointed out, in that case, perhaps it wasn't the US's particular point that was at dispute there.

[00:43:45] Speaker 07:
No, I'm talking about in this case.

[00:43:47] Speaker 07:
Oh, in this case?

[00:43:48] Speaker 05:
Yes, the paragraph in which Congress referred to the Internet is quite ambiguous as to whether it's referring to it as an expanded service or an existing service.

[00:44:02] Speaker 07:
You know, this is at page 89 of the conference report.

[00:44:11] Speaker 07:
What we're talking about here is that Congress intended to limit, to grandfather the existing services in the same transmission medium and to any new services in the new transmission medium where only transmission similar to the existing service were provided.

[00:44:27] Speaker 07:
That second half of what they're talking about, which is where the internet might come in, is a bucket two kind of question.

[00:44:34] Speaker 07:
My friends, the primary submission they've made today, and I heard them arguing, is that they're a bucket one service.

[00:44:42] Speaker 07:
cannot be reconciled.

[00:44:43] Speaker 07:
Because of these other conditions?

[00:44:45] Speaker 05:
Because of these other conditions, because of the legislative history, and because of the... Did the register refer to these other conditions at all?

[00:44:52] Speaker 07:
Yes, it did, Your Honor.

[00:44:53] Speaker 07:
I could give you the exact site, but yes, they did.

[00:44:57] Speaker 03:
So how is it so clear from the statutory text, right?

[00:45:00] Speaker 03:
You're talking about a conference report, you're talking about what they intended, but what about the text of the statute?

[00:45:05] Speaker 07:
So the text... So we're talking about the word service.

[00:45:09] Speaker 07:
What I have here today is to convince you that there's some ambiguity there.

[00:45:14] Speaker 07:
It doesn't necessarily have to be completely foreclosed on the station.

[00:45:18] Speaker 07:
The conditions are in the text, aren't they?

[00:45:19] Speaker 07:
The conditions are in the text.

[00:45:20] Speaker 07:
That's exactly right.

[00:45:21] Speaker 07:
The conditions are in the text.

[00:45:23] Speaker 07:
And the background, of course, against which Congress legislated was well established.

[00:45:28] Speaker 07:
And there is this court's holding in MUSEAC.

[00:45:31] Speaker 03:
Well, but do you agree that Music Choice made internet transmissions before?

[00:45:36] Speaker 03:
before the statute.

[00:45:38] Speaker 07:
As the case comes to this court, they have the declaration of their CEO saying that he did.

[00:45:43] Speaker 07:
That's the record before this court.

[00:45:45] Speaker 07:
If that were further developed, I suspect that it would prove not to be the case.

[00:45:49] Speaker 07:
But as it comes to the court, that is the state.

[00:45:52] Speaker 07:
But what the registrar also noted in the registrar's opinion is that the grandfathering clause in light of this court's decision in MUSAC should be narrowly construed only to protect pre-existing investments.

[00:46:06] Speaker 07:
What the registrar pointed out was, whatever this internet service was, assuming that it existed at all,

[00:46:12] Speaker 07:
It was so inconsequential that the arbitration panel did not make note of it.

[00:46:18] Speaker 07:
The librarian did not make note of it.

[00:46:20] Speaker 07:
Congress did not make note of it.

[00:46:22] Speaker 07:
And so if we're talking about grandfathering to protect existing investments, that's yet another reason why, as a matter of law in determining what a service is, it is reasonable to say it does not include and encompass an inconsequential service.

[00:46:36] Speaker 05:
Well, if it was in bucket two, then Congress did contemplate.

[00:46:39] Speaker 07:
So let's talk about bucket two.

[00:46:41] Speaker 07:
If it is bucket, I don't dispute the general proposition that bucket two services are entitled to the more favorable rate standard, but whether something is bucket two or not comes down to whether it is similar enough to what was before.

[00:46:55] Speaker 07:
The way you define similar enough, under the register's opinion,

[00:46:59] Speaker 07:
are six non-binding, but I think quite sensible, drawn from the legislative text of legislative history, factors in terms of does it substitute?

[00:47:08] Speaker 07:
Does it provide greater functionality?

[00:47:11] Speaker 07:
And those types of considerations.

[00:47:16] Speaker 07:
At that level, the question for this court is did the judges, the CRB, abuse their discretion, their substantial discretion in these kinds of cases in concluding that internet transmissions outside the home

[00:47:29] Speaker 07:
are different in kind, sufficiently different, to not be a bucket two, but rather a bucket three service.

[00:47:37] Speaker 05:
If we conclude it's bucket one, then you lose, right?

[00:47:41] Speaker 07:
If you were to conclude it's bucket one, then there would have to be a remand, yes.

[00:47:44] Speaker 07:
But it's not a bucket one service, because the text of the statute, the structure, as Chief Judge Srinivasan pointed out, is inconsistent with treaty internet transmissions that way.

[00:47:56] Speaker 07:
the legislative history not only affirmatively defines services to be cable satellite but expressly distinguishes them from later competitive burgeoning internet services and that makes perfect sense because there was no substantial or consequential internet service on the horizon.

[00:48:15] Speaker 07:
How do we know that?

[00:48:16] Speaker 07:
We know that because the CARP when it was talking about it

[00:48:19] Speaker 07:
did not talk about pre-existing services that way or the services that were before it that way.

[00:48:24] Speaker 07:
We know that's the case because when the librarian reviewed it, did not disturb the definition of those services as cable satellite, said that they're really facing competition from the internet, and the conference report is exactly the same way.

[00:48:40] Speaker 07:
This is really an easier case, I think, than the MUSAC case because whatever ambiguity was floating around there,

[00:48:49] Speaker 07:
all signs point in the same direction here, that those internet services are not bucket one.

[00:48:54] Speaker 07:
They could be bucket two, but the royalty board here has confirmed that they're not.

[00:49:00] Speaker 01:
Do you think that they can't be bucket one?

[00:49:04] Speaker 01:
By the way, buckets, I'm assuming that your bucket one is existing, bucket two is expanded.

[00:49:09] Speaker 01:
Yes.

[00:49:09] Speaker 01:
Okay.

[00:49:10] Speaker 01:
So by saying that they're not in the category of existing, are you saying that the register couldn't conclude that

[00:49:19] Speaker 01:
that any Internet transmission is within existing, even though Music Choice was making Internet transmissions in 1998?

[00:49:28] Speaker 07:
We think, in light of the court's Muzak decision and the rule of construction that's stated there, if the statute is clear, it favors us.

[00:49:37] Speaker 07:
At best, or at worst, I suppose, it's ambiguous, in which case you would defer to the Register's conclusion, as well as the legislative history that's... But do you think it's so clear that the Register couldn't make that

[00:49:49] Speaker 01:
couldn't conclude that Internet transmissions were part of the things that were being offered in 1998, and therefore some Internet transmissions are within existing.

[00:50:02] Speaker 07:
What we argued to the Register when the case went up was that the statute, yes, the answer to your question is yes.

[00:50:11] Speaker 07:
Our primary submission to the Register, although we don't need to go this far to win the case, is that

[00:50:16] Speaker 07:
existing does not include internet.

[00:50:19] Speaker 07:
If there's ambiguity, then we do everything that we were just talking about here.

[00:50:25] Speaker 05:
And your theory of why existing does not include internet as a matter of law is what?

[00:50:32] Speaker 05:
Text structure and history.

[00:50:34] Speaker 07:
The text, if you look at what Congress was doing when it was dividing up how it was going to

[00:50:42] Speaker 07:
the requirements it was going to impose on existing services versus the requirements it was going to impose on buckets two and going forward services.

[00:50:50] Speaker 07:
Bucket one is exempt from the internet related restrictions.

[00:50:56] Speaker 07:
Bucket two has them in spades.

[00:50:59] Speaker 01:
And what particular present are you talking about?

[00:51:01] Speaker 07:
That's what I'm confused about.

[00:51:02] Speaker 07:
What are you talking about?

[00:51:03] Speaker 07:
I think the clearest one is C3, which deals with archive programs.

[00:51:11] Speaker 07:
And what it says is, if you want to get the favorable treatment as a bucket two provider, you cannot make archive programs available to the user, which is a concept that works very well on the internet.

[00:51:32] Speaker 07:
Anyone can go on the internet and listen to five symphonies in a row or five pop songs in a row.

[00:51:37] Speaker 07:
has no bearing for cable and satellite transmissions.

[00:51:42] Speaker 07:
There's also technical provisions that are a little harder to explain, but if the court goes through the other provisions in C, you find that there are rights management provisions that are, again, only make sense in the context of an internet service, don't make any sense in the context of a satellite service.

[00:52:03] Speaker 01:
And what do you say about the point that was raised earlier by Judge Rao

[00:52:06] Speaker 01:
Even if all that is true about Internet services, it doesn't necessarily have to do with Internet services provided by one of the three pre-existing entities, as opposed to an Internet service provided by somebody else.

[00:52:18] Speaker 07:
It's a fair point, but I think it puts us in the world of, well, what did Congress really mean then?

[00:52:22] Speaker 07:
And there, with that ambiguity, you go to the legislative history and the administrative backdrop, all of which

[00:52:31] Speaker 07:
not only, as I repeat myself, not only affirmatively define these services to be cable satellite, but expressly say this is not the internet.

[00:52:38] Speaker 07:
The internet is going to be a different kind of consideration, different set of considerations in the bucket to in the expanded set of services.

[00:52:49] Speaker 07:
If the court is no, I say I'm past my time, so thank the court for its time.

[00:52:53] Speaker 01:
Thank you, counsel.

[00:52:58] Speaker 01:
We'll give you three minutes of rebuttal.

[00:53:00] Speaker 06:
Thank you, Robert.

[00:53:01] Speaker 06:
So the statute does not expressly describe these as cable and satellite services.

[00:53:09] Speaker 06:
The legislative history mentions cable and satellite and mentions the three companies and the services.

[00:53:15] Speaker 05:
What about his structural argument, other provisions of the statute apply only to cable and television and do not apply to internet?

[00:53:25] Speaker 06:
But they don't.

[00:53:26] Speaker 06:
This was exactly my point.

[00:53:28] Speaker 06:
If you look at the actual statute, if you look at the actual statute,

[00:53:31] Speaker 06:
The way you determine which apply is the statutory language in the transmission medium used by the service in 1998.

[00:53:41] Speaker 06:
Here's the reason why.

[00:53:43] Speaker 06:
Music Choice was transmitting over the internet for a couple of years prior to 1998.

[00:53:49] Speaker 06:
All during that time,

[00:53:50] Speaker 06:
The only restrictions in the statutory license were the restrictions that Music Choice currently has, these D2B restrictions.

[00:54:02] Speaker 06:
What are they?

[00:54:04] Speaker 06:
The truth is, they're technical restrictions, but they do involve you have to satisfy the sound recording performance complement,

[00:54:11] Speaker 06:
There are certain things, they can't play too many songs by the same artist in a row, and so there are various technical features that they have to comply with with the programming.

[00:54:22] Speaker 06:
But the point is, those were already applicable, there was no separate category for internet prior to 1998.

[00:54:31] Speaker 06:
And so Congress decided for the services, whatever they were doing at that time, that's how we're going to determine which set of restrictions move forward.

[00:54:39] Speaker 06:
So there's nothing in that structure.

[00:54:42] Speaker 06:
that would cause you to move away from the language of the statute that tells you exactly how you're supposed to determine that.

[00:54:48] Speaker 06:
And it's a factual issue.

[00:54:49] Speaker 06:
And I think, you know, the legislative history, it's important to remember there were no fact findings associated with that legislative history.

[00:54:56] Speaker 06:
There were no hearings about which transmission media the services were using.

[00:55:01] Speaker 06:
Music choice was never asked.

[00:55:02] Speaker 06:
Music choice was never even involved in the lobbying for that legislation.

[00:55:07] Speaker 06:
So there were no fact findings behind that.

[00:55:09] Speaker 06:
It was just a list.

[00:55:12] Speaker 06:
And as far as the MUSAT case is concerned, that presented entirely different issues than this case.

[00:55:18] Speaker 06:
The question of transmission medium was not in the case.

[00:55:21] Speaker 06:
The statutory language

[00:55:24] Speaker 06:
that's important here, the D2B language, transmission medium used by such service, was not in that case.

[00:55:30] Speaker 06:
That was about the only other pre-existing service entity who, through a series of inter-corporate transactions, acquired a whole separate service.

[00:55:38] Speaker 05:
No, you're absolutely right.

[00:55:39] Speaker 05:
That's a different case.

[00:55:40] Speaker 06:
And as far as this idea of core services, there's no such distinction in the statute or even in the legislative history.

[00:55:50] Speaker 05:
Well, arguably there is.

[00:55:52] Speaker 05:
And the paragraph dealing with the prospect of an internet service is not at all clear whether Congress was referring to that as what we're talking about as bucket one or bucket two.

[00:56:08] Speaker 06:
I agree with Your Honor that the legislative history is far from clear, which is yet another reason that it certainly shouldn't be used to change the text of the statute.

[00:56:17] Speaker 06:
Thank you, Your Honor.

[00:56:17] Speaker 05:
Justice Scalia once referred, ironically,

[00:56:22] Speaker 05:
using ambiguous legislative history to reverse the normal notion.

[00:56:32] Speaker 05:
If the statute is ambiguous and the legislative history is ambiguous, there should be even more deference.

[00:56:40] Speaker 05:
Was that before or after he threw the brief, sir?

[00:56:45] Speaker 01:
Thank you.

[00:56:45] Speaker 01:
Thank you, counsel.

[00:56:46] Speaker 01:
Thank you, counsel.

[00:56:47] Speaker 01:
The case is submitted.

[00:56:48] Speaker 01:
The court will take a short recess before reconvening for the third case.